第19章

Itissafetoaffirmthatthisgood-willofthegreatreorganizerhasinsomemeasureenteredincapitalizedformintothecommonstockoftheUnitedStatesSteelCorporation，asalsointothatofsomeoftheothergreatcombinationsthathavelatterlybeeneffected。The“good-will“ofMrCarnegieandhislieutenants，aswellasofmanyotherlargebusinessmenconnectedwiththesteelindustry，hasalsonodoubtgonetoswellthecapitalizationofthegreatcorporation。Butgood-willonthishigherlevelofbusinessenterprisehasacertaincharacterofinexhaustibility，sothatitsuseandcapitalizationinonecorporationneednot，andindeeddoesnot，hinderordiminishtheextenttowhichitmaybeusedandcapitalizedinanyothercorporation。(31*)Thecaseisanalogous，thoughscarcelysimilar，tothatoftheworkmanlikeorartisticskillofahandicraftsman，oranartist，whichmaybeembodiedinagivenproductwithoutabatingthedegreeofskillpossessedbytheworkman。Likeothergood-will，thoughperhapsinahigherdegreeofsublimation，itisofaspiritualnature，suchthat，byvirtueoftheubiquitypropertospiritualbodies，thewholeofitmayundividedlybepresentineverypartofthevariousstructureswhichithascreated。Indeed，thefactofsuchgood-willhavingbeenincorporatedincapitalizedforminthestockofanygivencorporationseemsrathertoaugmentthantodiminishtheamountatwhichitmayadvantageouslybecapitalizedinthestockofthenextcorporationintowhichitenters。Ithasalsothecorrelativespiritualattributethatitmayimperceptiblyandinscrutablywithdrawitsanimatingforcefromanyoneofitscreatureswithouttherebyalteringthematerialcircumstancesofthecorporationwhichsufferssuchanintangibleshrinkageofitsforces。 Therecanbenoquestionbutthatthegood-willofthevariousgreatorganizersandtheirfinancieringhouseshasrepeatedlybeencapitalized，probablytoitsfullamount，inthecommonstockofthevariouscorporationswhichtheyhavecreated； buttakeninthesenseofanassetbelongingtothefinancinghouseasacorporation，itisnotknownthatthisitemofimmaterialwealthhasyetbeenformallycapitalizedandofferedinquotablesharesonthemarketorincludedintheschedulesofpersonalproperty。(32*) Thesublimationofbusinesscapitalthathasbeengoingforwardinrecenttimeshasgraveconsequencesfortheownersofpropertyaswellasfortheconductofindustry。Insofarasinvestedpropertyismanagedbythemethodsofmodemcorporationfinance，itisevidentthatthemanagementisseparatedfromtheownershipoftheproperty，moreandmorewidelyasthescopeofcorporationfinancewidens。Thediscretion，themanagement，liesinthehandsoftheholdersoftheintangibleformsofproperty； andwiththeextensionofcorporationmethodsitisincreasinglytruethatthismanagement，again，centresinthehandsofthosegreaterbusinessmenwhoholdlargeblocksoftheseintangibleassets。Thereachofabusinessman’sdiscretionarycontrol，undercorporationmethods，isnotproportionedsimplytotheamountofhisholdings。Ifhisholdingsarerelativelysmall，theygivehimvirtuallynodiscretion。Whereasiftheyarerelativelylarge，theymaygivehimabusinessdiscretionofmuchmorethanaproportionatereach。Theeffectivereachofabusinessman’sdiscretionmightbesaidtoincreaseasthesquareofhisholdings；althoughthisistobetakenasasuggestivecharacterizationratherthanasanexactformula。 Amongtheholdingsofindustrialpropertythatcountinthiswaytowardcontrolofthebusinesssituation，theintangibleassets(representedbycommonstock，good-will，andthelike)arechieflyofconsequence。Hencefollowthesetworesults:thefortunesofpropertyownersareinlargemeasuredependentonthediscretionofotherstheownersofintangibleproperty；andthemanagementoftheindustrialequipmenttendsstronglytocentreinthehandsofmenwhodonotowntheindustrialequipment，andwhohaveonlyaremoteinterestintheefficientworkingofthisequipment。Thepropertyofthosewhoownless，orwhoownonlymaterialgoods，isadministeredbythosewhoownmore，especiallyofimmaterialgoods；andthematerialprocessesofindustryareunderthecontrolofmenwhoseinterestcentresonanincreasedvalueoftheimmaterialassets。 Thedistinctionbetweenbusinesscapitaland“industrialcapital“or“capitalgoods“hasbeenshownbyKnies，GeldundCredit，vol。I。ch。II。pp。40-60。DistinctionshavingaverysimilarerectinsomebearingsaretobefoundinRodbertus(“privatecapital“and“nationalcapital“)，inBohm-Bawerk(“acquisitivecapital“and“productivecapital，“or“privatecapital“and“socialcapital“)，inClark(“capital“and“capitalgoods“)。Similardistinctionsaremadebyvariouswriterstohelpouttheincompetencyofthereceiveddefinitionoftheterm。Themeritofthesedistinctionsdoesnotconcernthepresentinquiry，sincetheyaremadeforotherpurposesthanthathereaimedat。 Thedistinctionmadeaboveisnotanattempttorecasttheterminologyofeconomictheory，butissimplyanexpedientforpresentuse。Itamountstoanunqualifiedacceptanceoftheconcept(moreorlesswelldefined)whichbusinessmenhabituallyattachtotheterm“capital。“MrF。A。Fetterhaslatterlyspokenfortherestrictionof“capital，“asatechnicalterm，practicallytowhatisherecalled“businesscapital。“MrFetter’s“capitalconcept，“however，shouldprobablynotbetakentocoverintangibleassets。ThepracticaldistinctionisvisibleinthetestimonyofvariouswitnessesbeforetheIndustrialCommission，asalsointhespecialreporton“Securities，“ Report，vol。XIII。 EvensolateandcompetentastudentofcorporatecapitalasJ。vonKorosiisboundbythisantiquepreconception，andhisworkhassufferedinconsequence。SeeFinanzielleErgebnissederActiengesellschaften，p。3。 Thisstateofthecaseisbroughtout，inaveiledmanner，bythewell-knownproposition，expoundedinvaryingformbyvariouswriters，thatthecostofequipmentonwhichcapitalizationmust，intheory，takeplaceisthecostofreproductionofallvaluableitemsincluded，tangibleandintangible。 “Nothingismoreillusiveanddelusivethantheideathatifacorporation’sstockbeonlypaidininmoneyattheoutsetitisthereforebetteroffthanonethathasissueditsstockforpropertythatcouldnotbeconvertedforonecentonthedollar。 Thequestioniswhatassetsthecorporationhasgotatthetimeoftheparticulartransaction，andthatcanbeascertainedonlybypresentinquiry。“-TestimonyofF。L。Stetson，ReportoftheIndustrialCommission，vol。I。p。976。Cf。Meade，TrustFinance，ch。XVIandXVIII。 Earning-capacityispracticallyacceptedastheeffectivebasisofcapitalizationforcorporatebusinessconcerns，particularlyforthosewhosesecuritiesarequotedonthemarket。 Itisinthestockmarketthatthiseffectivecapitalizationtakesplace。Butthelawdoesnotrecognizesuchabasisofcapitalization；norarebusinessmengenerallyreadytoadoptitinsetform，althoughtheyconstantlyhaverecoursetoit，ineffect，inoperationsofinvestmentandofcreditextension。Cf。 ReportoftheIndustrialCommission，vol。I。pp。6，17，21(Test。 F。B。Thurber)；p。967(Test。F。L。Stetson)；pp。585-587(Test。 H。H。Rogers)；pp。110-111，124(Test。H。O。Havemeyer)；pp。1021，1032(Test。J。W。Gates)；pp。1054-1055(TestS。Dodd)；vol。XIII。 pp。287-288(Test。H。Burn)；p。388(Test。J。Morris)；pp。 107-108(Test。E。R。Chapman)。SeeQuarterlyJournalofEconomics，February1903，pp。344-345，“TheHolyokeWaterCase，“foranillustrativedecision。 Theadvantagesaffordedtheirownersbytheseintangibleassetshavelatterlybeendiscussedbyeconomistsundersuchheadingsas“Rent“or“Quasi-Rent。“Thesediscussions，itisbelieved，areofgreattheoreticalweight。Inbusinesspractice，however，theitemsinquestionaretreatedascapital，whichmustavailasanexcuseforincludingthemhereinbusinessCapital。 CompareBohm-Bawerk’sandClark’sdistinctionsbetween“private“and“social“capital，andbetween“capital“and“capitalgoods。“ SeeChapterIIIabove。 Onthebooksofthecorporationitis，ofcourse，carriedasanitemofliability；asisthecommonstock；butthatisatechnicalexpedientofaccountancy，anddoesnottouchthesubstantialquestion。 10。Seetestimonyofvariouswitnesseson“Capitalization“beforetheIndustrialCommission，vols。I，IX，XIII。 11。Asoneofmanyillustrativecases，theRubberGoodsManufacturingCompanymaybetakenasatypicalinstanceofacorporationorganizedinaconservativebutup-to-datemannerforpermanentsuccessandstablevalue。Itsauthorizedissueofstockis$25，000，0007percentcumulativepreferred，and$25，000，000 common。Theactualissuein1901wasabout$8，000，000preferredand$17，000，000common，ofwhichthepreferredwaspresumedtocoverthevalueofthetangibleassets。Anothercoalitionorganizedbythesamepromoter(MrC。R。Flint)，theAmericanChicleCompany，illustratesthesamegeneralfeature。Thepreferredstockofthiscompany($3，000，000)“inroundnumberswasthreetimestheamountoftangibleassets，“whilethecommonstock($6，000，000)representsnotangibleassets。Theaggregatecapitalizationisaboutninetimesthetangibleassets。Thewitnesssaysthatthiscorporationhasbeenprovedbyeventstobe“onaconservativebasisfromthefactthatthecompanyhaspaid8percentonitscommonstock，“whichhasbeensellingat80-ReportoftheIndustrialCommission，vol。XIII。pp。47，50。 12。Itmaybearguedthatthisidentificationofthecommonstockwiththeintangibleassetsholdstrueintheoryonly，inthesensethatthisistheviewheldbythebusinessmenwhooccupythemselveswithsuchmatters；whileinpointoffactnodistinctionofthisnaturebetweencommonandpreferredstockisorcanpracticallybemaintainedafterthestockhasoncefounditswayintothemarket。Itmightseem，inotherwords，thatwhenthestockhasoncepassedthestageoforganizationandgoneintothehandsofthepurchasers，eachsharerepresentsnothingbutanundividedinterestintheaggregatecapitalizationoftheconcern，sothattheparticularitemofwealthrepresentedbyagivenshareorgivenformofsecuritycannolongerbeidentified。 Onthefaceofthesituationsuchappearstobethecase，buttherearefactswhicharguefortheviewsetoutabove。Itis，e。g。，wellknownthatwhenevercircumstancesarisewhichimmediatelyaffectthevalueofthegood-willofacorporation，itisthequotationsofthecommonstockthatfirstandmostdecidedlyareaffected。Ifthegoodwilloftheconcernmakesagreatandrapidgain，e。g。throughmanoeuvreswhichputitinapositionofmonopolyorthroughchangesinthegoodsmarketwhichgreatlyincreasethedemandfortheconcern’sproduct，andthelike，itisthequotationofthecommonstockthatmeasuresandregisterstheadvantagewhichtherebyaccruestotheconcern，andthemarketfluctuationofthecommonstockislikewisetheinstrumentbymeansofwhichmanipulationsarecarriedthroughthataffecttheseintangibleassets。Atthesametimethisruledoesnotholdhardandfast，asisseenincaseofaliquidationwhenthecapitaloftheconcernmayhaveshrunktosuchdimensionsthattheentirecapital，includingtheintangibleassets，willnomorethansatisfytheclaimsrepresentedbythedebentures。Still，inpointofpracticalfact，the(theoretical) preconceptionofbusinessmenthatthecommonstockinsomeintelligiblesensecoverstheintangibleassetsisfairlyborneoutbyeverydayexperience，takenbyandlarge。 Acuriousparallelmightbetracedbetweenthecurrentendeavorsofthebusinesscommunitytoorganizeandmanagetheindustrialequipmentonthebasisofimmaterialassetsandthemedievalbusinessperplexitiesandactionsrelativetoloansoninterest。Inbothcasesthebusinesscommunityhashadtofaceuntriedexigenciestogetherwithapopular，traditionalprejudicethatdiscountenancestheexpedientsbywhichtheseexigenciesaretobemet。Themedievalpresumptionwasthatthemanagementofproductivegoodsandtheprofitsaccruingfromtheirusemustgototheirusers。(Cf。Ashley，EconomicHistory，vol。I。ch。III，vol。IIch。VI；Endemann，DienationalokonomischeGrundsatzederkanonistischenLehre。)Themodernpresumptionisthatthemanagementoftheequipmentandthegainsfromsuchmanagementmustvestintheowner。Themodernexigenciesdecidethattheequipmentmustbemanagedbyothersthantheownersandthatprofitsmustlargelyaccruetothosewhofinanciallymanagetheconcern。Theexpedientbywhichthisresultissoughttobereachedisthefictionofintangibleassetsandtheimpersonal，irrevocablecreditextensioncoveredbythepreferredstock。Theeffectistodissociateownershipfrommanagement。Thisisthenecessaryoutcomeofa“crediteconomy“consistentlyandfullycarriedthrough。Themanagementofthematerialequipmentofindustryisthrownintothehandsofthosewhoowntheimmaterialwealth；thatistosay，thosewhoowntheclaimtomanagetheequipment。Thecurrentprejudicewhichinsistsonmanagementbytheownersissetasidebyfeigningthatthisclaimhasanindustrialvalue，andsocapitalizingitonthebasisofthedifferentialadvantagewhichaccruestoitsholders。 SeealsoadiscussionbyE。S。Meade，QuarterlyJournalofEconomics，February1902，pp。217etseq。，ofhow“good-will“mayvaryinmagnitude，orevendisappear，whenaconcerneatersalargercoalition；also，onthesamegeneralhead，W。F。 Willoughby，“IntegrationofIndustryintheUnitedStates，“ ibid。，November